Territoriality and the Perils of Formalism

Recently in this journal Donald Regan published a pair of essays on CTS Corp. v. Dynamics Corp. of America. Much of the first essay elaborates his theory that what the Supreme Court should be doing and what it is doing under the dormant commerce clause is checking state laws adopted with a substantial protectionist purpose. The rest of the first essay and all of the second essay develop a different check on state lawmaking power in interstate affairs: a rule that states may not regulate conduct beyond their borders. He calls this the extraterritoriality principle. Elsewhere I have questioned whether Regan’s theory of protectionism is sufficient to explain what the Court is and should be doing under the dormant commerce clause. Here I want to question the extraterritoriality principle. My argument is that it works poorly, if it works at all, as a check on the regulatory authority of states. I also make the broader point that Regan’s two proposals are overly formal. They blind us to what should be our real concerns when reviewing state laws that affect out-of-state interests and may generate an intolerable number of bad results. At the end I briefly sketch an alternative approach to these problems that is more open-ended.